U.K. Stocks Fall as Housebuilders Drop on Osborne Speech

U.K. stocks fell the most in two months as George Osborne promised that the Bank of England will get new powers to rein in mortgage lending, while BOE Governor Mark Carney said interest rates may rise sooner than expected.

Persimmon Plc, the U.K.’s largest housebuilder, slid 7 percent. Barratt Developments Plc and Bovis Homes Group Plc lost 6.3 percent and 4.9 percent, respectively, as a report showed construction output in Europe’s third-biggest economy grew at a slower-than-expected pace in April.

The FTSE 100 Index (UKX) lost 65.26 points, or 1 percent, to 6,777.85 at the close of trading in London, extending the benchmark’s decline this week to 1.2 percent. The broader FTSE All-Share Index retreated 1.1 percent today, while Ireland’s ISEQ Index dropped 1.4 percent.

“Carney’s comments are weighing on the property sector in general,” Richard Hunter, head of equities at Hargreaves Lansdown Plc in London, wrote in an e-mail. “The share-price moves may have been amplified by generally weaker sentiment.”

The Chancellor of the Exchequer used his annual Mansion House speech in the City of London last night to commit himself to legislation allowing the BOE to restrict the amount of money people can borrow as home loans. The measures include limits on mortgages as a multiple of income and caps on loans as a proportion of the purchase price.

Carney -- also speaking at Mansion House -- said higher borrowing costs could stretch over-leveraged households and undermine financial stability.

Disrupted Production

In Iraq, the escalating violence risks further disruptions to exports from OPEC’s second-biggest oil producer. Prime Minister Nouri al-Maliki’s Shiite-led government is struggling to retain control of Sunni-majority regions after his army units in northern Iraq collapsed.

U.S. President Barack Obama said he won’t rule out using air strikes to help the government in Baghdad. The group that calls itself the Islamic State in Iraq and the Levant seized Mosul on June 11.

A preliminary reading showed that the Thomson Reuters/University of Michigan index of sentiment fell to 81.2 in June, missing the median projection of 83 in a Bloomberg survey of economists.

Persimmon slumped 7 percent to 1,211 pence. Barratt Developments and Bovis Homes lost 6.3 percent to 346.3 pence and 4.9 percent to 751 pence, respectively. Taylor Wimpey Plc (TW/) slumped 6.3 percent to 104 pence. British Land Co. slid 4.3 percent to 686 pence.

Ophir Energy Plc gained 1.8 percent to 240.1 pence. A gauge of oil companies climbed the most among the 19 industry groups in the Stoxx Europe 600 Index as an offshoot of al-Qaeda extended its military campaign in Sunni areas of Iraq.

To contact the reporter on this story: Jonathan Morgan in Frankfurt at jmorgan157@bloomberg.net

To contact the editors responsible for this story: Cecile Vannucci at cvannucci1@bloomberg.net Will Hadfield

Press spacebar to pause and continue. Press esc to stop.

Bloomberg reserves the right to remove comments but is under no obligation to do so, or to explain individual moderation decisions.

Please enable JavaScript to view the comments powered by Disqus.